August 29, 2019 / 9:32 AM / 6 months ago

REFILE-CEE MARKETS-Hungary's forint near all-time low amid global worries, bonds surge

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    By Marton Dunai
    BUDAPEST, Aug 29 (Reuters) - Hungary's forint
neared an all-time low on Thursday against the euro due to fears
of a global recession, a trade war and a no-deal Brexit, but its
bond yields were close to historic lows thanks to a robust
economy and tight fiscal policy at home.
    The forint hovered at 330 to the euro, just shy of its
330.75 record low, as fears of external challenges dented risk
appetite and the central bank held to its loose monetary policy.
    The weakening of the forint mirrored Asia, where emerging
currencies also slipped on Thursday.
    "We are a hair's breadth from the all-time low of EUR/HUF
330.75, while international uncertainty won't ease," Erste Bank
said in a note to clients. "The good news is that the forint
weakening involves no panic, so a new low is unlikely to
generate quick rises in selling pressure."
    The National Bank of Hungary has remained unfazed as it saw
inflation declining again from the top end of its 2-4% tolerance
    But while the forint is exposed to global trends and the
effects of a loose domestic monetary policy, Hungary's strong
economic performance and stringent fiscal policy keep government
bonds attractive enough to keep yields near the all-time lows it
set in the middle of August.
    "Locally, the central bank has maintained its expansive
policy despite some pressure to force it into policy tightening
in the last few months," a bond dealer said in Budapest. "That
pressure is all but gone and the bank is set to keep rates low."
    "Globally, investors are on the prowl for anything that is
remotely secure and offers a positive yield. Plus the government
offers new premium retail bonds, which have replaced a big chunk
of the supply."
    The Czech crown has also been slowly weakening back toward
its psychological level of 25.90 to the euro.
    "But unlike the Hungarian forint it does not want to
completely break this key technical level and open room for new
losses," CSOB analysts said.
    A mix of global and local factors also set the Polish zloty
on a weakening path, Millennium Bank said in a note to clients.
    "We can currently see no reasons for CEE currencies to
strengthen, so we regard as most probable a further, albeit
limited weakening of the zloty against major currencies."

            CEE        SNAPSHOT   AT                         
            MARKETS              1009 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.8660   25.8760    +0.04%    -0.61%
 Hungary               330.2500  330.1800    -0.02%    -2.78%
 Polish                  4.3894    4.3891    -0.01%    -2.27%
 Romanian                4.7300    4.7278    -0.05%    -1.61%
 Croatian                7.4000    7.4000    +0.00%    +0.14%
 Serbian               117.7000  117.7500    +0.04%    +0.51%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1026.76  1024.080    +0.26%    +4.07%
 Budapest              39019.85  38706.56    +0.81%    -0.30%
 Warsaw                 2055.73   2051.44    +0.21%    -9.70%
 Bucharest              9248.02   9245.95    +0.02%   +25.25%
 Ljubljana               849.36    852.01    -0.31%    +5.61%
 Zagreb                 1865.06   1863.58    +0.08%    +6.65%
 Belgrade   <.BELEX15    745.14    748.21    -0.41%    -2.17%
 Sofia                   566.45    566.45    +0.00%    -4.71%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.0680   -0.0070   +196bps     +0bps
   5-year   <CZ5YT=RR    0.8500    0.0390   +177bps     +3bps
   10-year  <CZ10YT=R    1.0400    0.0040   +174bps     -1bps
   2-year   <PL2YT=RR    1.5320    0.0140   +243bps     +2bps
   5-year   <PL5YT=RR    1.6250    0.0040   +254bps     +0bps
   10-year  <PL10YT=R    1.7800    0.0210   +248bps     +0bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      2.08      1.88      1.70      2.14
 Hungary            <      0.31      0.30      0.30      0.26
 Poland             <      1.71      1.64      1.58      1.72
 Note: FRA  are for ask prices                               
 (Reporting by Reuters bureaux
Editing by Gareth Jones)
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